State Department Expands Its Export Jurisdiction

The State Department has issued a rule that was announced as ‘clarifying’ the State Department’s policy with respect to which aircraft parts are considered commercial for export purposes, and which ones are considered to be governed by the International Traffic in Arms Regulations (ITARs). The true effect of this rule, though, is to expand the range of civil aircraft parts that are considered to fall within the State Department’s export jurisdiction.

This distinction is important to anyone who exports aircraft parts, because many non-ITAR aircraft parts (those subject to Commerce Department export jurisdiction) may often be exported without a license, but an exporter almost always must register and obtain a license to export anything that is considered to fit within the scope of the State Department’s ITARs (items described or referenced via the sometimes vague descriptions of the US Munitions List). The State Department is notoriously slow to issue export licenses.

Deciding which regulatory regime applies to your export can be difficult if your part is a dual-use part (one installed on both civilian and military models of an aircraft). The mission of the State Department was originally to clarify which parts are considered to fall within their jurisdiction; but they did this by issuing language that will include parts that were not previously included within their jurisdiction.

The New Rule

The new descriptive language will be found in a “Note” in the regulations:

Note: The Export Administration Regulations (EAR) administered by the Department of Commerce control any component, part, accessory, attachment, and associated equipment (including propellers) designed exclusively for civil, non-military aircraft (see Sec. 121.3 of this subchapter for the definition of military aircraft) and control any component, part, accessory, attachment, and associated equipment designed exclusively for civil, non-military aircraft engines. The International Traffic in Arms Regulations administered by the Department of State control any component, part, accessory, attachment, and associated equipment designed, developed, configured, adapted or modified for military aircraft, and control any component, part, accessory, attachment, and associated equipment designed, developed, configured, adapted or modified for military aircraft engines. For components and parts that do not meet the above criteria, including those that may be used on either civil or military aircraft, the following requirements apply. A non-SME component or part (as defined in Sec. Sec. 121.8(b) and (d) of this subchapter) that is not controlled under another category of the USML, that: (a) Is standard equipment; (b) is covered by a civil aircraft type certificate (including amended type certificates and supplemental type certificates) issued by the Federal Aviation Administration for a civil, non-military aircraft (this expressly excludes military aircraft certified as restricted and any type certification of Military Commercial Derivative Aircraft); and (c) is an integral part of such civil aircraft, is subject to the jurisdiction of the EAR. In the case of any part or component designated as SME in this or any other USML category, a determination that such item may be excluded from USML coverage based on the three criteria above always requires a commodity jurisdiction determination by the Department of State under Sec. 120.4 of this subchapter. The only exception to this requirement is where a part or component designated as SME in this category was integral to civil aircraft prior to August 14, 2008. For such part or component, U.S. exporters are not required to seek a commodity jurisdiction determination from State, unless doubt exists as to whether the item meets the three criteria above (See Sec. 120.3 and Sec. 120.4 of this subchapter). Also, U.S. exporters are not required to seek a commodity jurisdiction determination from State regarding any non-SME component or part (as defined in Sec. Sec. 121.8(b) and (d) of this subchapter) that is not controlled under another category of the USML, unless doubt exists as to whether the item meets the three criteria above (See Sec. 120.3 and Sec. 120.4 of this subchapter). These commodity jurisdiction determinations will ensure compliance with this section and the criteria of Section 17(c) of the Export Administration Act of 1979. In determining whether the three criteria above have been met, consider whether the same item is common to both civil and military applications without modification of the item’s form, fit, or function. Some examples of parts or components that are not common to both civil and military applications are tail hooks, rotodomes, and low observable rotor blades. “Standard equipment” is defined as a part or component manufactured in compliance with an established and published industry specification or an established and published government specification (e.g., AN, MS, NAS, or SAE). Parts and components that are manufactured and tested to established but unpublished civil aviation industry specifications and standards are also “standard equipment,” e.g., pumps, actuators, and generators. A part or component is not standard equipment if there are any performance, manufacturing or testing requirements beyond such specifications and standards. Simply testing a part or component to meet a military specification or standard for civil purposes does not in and of itself change the jurisdiction of such part or component. Integral is defined as a part or component that is installed in an aircraft. In determining whether a part or component may be considered as standard equipment and integral to a civil aircraft (e.g., latches, fasteners, grommets, and switches) it is important to carefully review all of the criteria noted above. For example, a part approved solely on a non-interference/provisions basis under a type certificate issued by the Federal Aviation Administration would not qualify. Similarly, unique application parts or components not integral to the aircraft would also not qualify.

What Does This Mean?

The State Department divides the world of exported items into Significant Military Equipment (SME) and non-Significant Military Equipment (non-SME).

SME means articles for which special export controls are warranted because of their capacity for substantial military utility or capability. SME can be identified in the USMLs by the asterisks next to their entries.

A non-SME component or part (as defined in Sec. Sec. 121.8(b) and (d)) that is not controlled under another category of the USML, is subject to the jurisdiction of the Commerce Department (not the State Department), only if the part meets each of the following criteria:

Remember that the USMLs have a catch-all that permits the State Department to declare that any item used as a defense-related article is covered by the USMLs – such declaration is made at the State Department’s discretion. So almost anything can be declared as a non-SME item.

In the case of any aircraft part designated as SME in any category of the USML, the part will be assumed to be a USML item (subject to State Department regulation and licensing requirements). The only way to avoid this assumption is to obtain a commodity jurisdiction determination by the Department of State – a very time-consuming process.

Where a part or component designated as SME was integral to a civil aircraft prior to August 14, 2008, there will be an exception – U.S. exporters are not required to seek a commodity jurisdiction determination from the State Department for exporting such parts, unless doubt exists as to whether the item meets the three bulleted criteria, above.

This is a Problem!

The New State Department regulations makes an alarming confusion between the phrase “standard equipment in an aircraft” and the notion of “standard parts.” It states that “A part or component is not standard equipment if there are any performance, manufacturing or testing requirements beyond” industry specifications and standards. The State Department explicitly states that “In determining whether a part or component may be considered as standard equipment and integral to a civil aircraft (e.g., latches, fasteners, grommets, and switches) … a part approved solely on a non-interference/provisions basis under a type certificate issued by the Federal Aviation
Administration would not qualify. Similarly, unique application parts or components not integral to the aircraft would also not qualify.”

This seems to suggest that a part that is approved under a STC/PMA combination based in part on a “no-technical-objection letter” from the OEM would not be considered standard equipment. The language of the rule also makes it clear that any item that is not based on a “civil aviation industry specification [or] standard” is not standard equipment. This is a clear confusion between the intent of the original Export Administration Act, which was meant to exclude normal aircraft equipment, and the much more limited category of standard parts (which are excluded from the PMA requirement under 14 C.F.R. 21.303(b)).

This rule could be a nightmare for PMA companies seeking to export their parts, if it is interpreted to permit the State Department to extend jurisdiction over all non-SME parts that are not manufactured as standard parts. It would mean that PMA companies that had been aggressive in obtaining Defense Department approval to sell their parts as replacements for military corollary parts could be penalized for doing business with the Defense Department by being required to obtain State Department approval for export of the otherwise civilian parts.

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About Jason Dickstein

Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.